A new brand makeover and a weaker yen sets Mazda up for an opportunity to drive more profitable North American operations. Mazda relies on Japanese imports more heavily than any other brand, and according to Automotive News, “The slide in the yen has turned Mazda’s biggest weakness into its biggest strength.” All they have “to do now is sell more cars.” “Game Changers,” Mazda’s first new brand effort in over a decade, notable for its digital focus, is aimed to do just that. Compete analyzed proprietary in-market automotive shopper metrics to define Mazda’s opportunities (and risks) in a competitive automotive marketplace.
Compete determined the best growth opportunities by looking at demand and conversion on a more granular level for three Mazda models: Mazda3, Mazda6 and CX-5. Mazda3 contributes the most sales to the Mazda brand. CX-5, new as of 2012, brings a new look with SkyActiv systems, and accounts for the second most sales for the brand. Mazda6 rounds out the top three selling models.
Comparing relative strengths in demand and conversion informs Mazda’s marketing decisions on whether to focus spend on marketing dollars to generate demand or on incentives to increase conversion for each model.
Mazda3 is Mazda’s best seller because it had relatively high demand and best-in-set conversion in March. The model is near end of cycle, so demand may decrease in coming months, while conversion may increase.
CX-5 sales in March were a result of Mazda-leading demand, but there’s room to improve conversion. The CX-5’s conversion is inhibited by tight supply–47 days’ supply in March, according to Wards (60 is healthy).
Demand for the new 2014 Mazda6 trails both Mazda3 and CX-5 demand, but note the great progress in the past 6 months. There are strategic options for Mazda6’s demand growth, since it’s a player in the highly shopped (and cross-shopped) midsize segment.
Mazda6 Deep Dive
Demand and conversion are both down year over year, but demand and conversion are up month over month, near period highs. Specifically, the recent lift in Mazda6 demand likely coincides with launch spend as this model is encompassed by the “Game Changers” campaign.
Surprisingly, there was a recent lift in conversion in the past several months. Conversion is typically low around launch, since dealers are often hindered by low inventory. In this case, Mazda6 had a 24 day supply in March; it may have had even higher conversion if it wasn’t limited by tight supply.
Conversion is also often impacted by incentives. An OEM will often pull back on incentives when a vehicle is new. In March, Mazda6 had $2,006 of incentives on the hood, according to AutoData. It’s relatively high for the midsize segment, but the lowest in seven months for Mazda6. Higher conversion on lower incentives suggests relative success.
If Mazda wants to increase Mazda6 sales by 50%, month over month (9,000 units), the model needs 50% more shoppers, or 50% higher conversion (or, more likely, a combination of the two). Sounds ambitious, but when pitting Mazda6 against the four top sellers in the midsize segment, it’s definitely plausible.
Since conversion is on par with the top selling rivals, Mazda’s best bet to increase Mazda6 sales with a demand increase. The midsize segment is highly shopped and highly cross-shopped, spearheaded by Camry, Accord, and Fusion. These three models have ranked in the top 10 models shopped, market-wide, throughout 2013.
Mazda has two options to drive demand. The first option is continued ad support with the “Game Changers” campaign. The second option is for Mazda to engineer “spillover demand,” which is when spend by a rival generates shoppers for Mazda, because Mazda6 is on the shopping list of the rival. For example, if 100,000 consumers are shopping for a Camry as a result of Toyota ad spend, and 10% of them also shop a Mazda6, Mazda6 will have spillover demand equivalent to 10,000 shoppers. If Mazda6 sustains 30% conversion, those 10,000 shoppers will lead to 3,000 more monthly sales, worth approximately $60 million in incremental, monthly revenue.
If Mazda wants to take advantage of the weaker yen, and drive more US sales, Compete recommends the following next steps:
- Repeat Deep Dive analysis for Mazda3 and CX-5
- Analyze ad spend efficiencies to determine cost per shopper and align media budget with demand goals
- Use Roadmaps to reverse engineer combinations of conversion and demand to meet sales goals
- Discover drivers of faster than normal conversion gains and determine whether they’re sustainable
- Quickly understand and refine successes of “Game Changers”
Leslie Griffin is a Client Services Associate in Compete's Automotive department, analyzing Compete data to provide marketing insights to the auto industry. Before Leslie joined Compete in 2012, she was in the digital ad sales department in the Motor Trend Automotive Group. Connect with Leslie on LinkedIn.